Small business lending by commercial banks in Colorado : 1994 to 1996

The structure of Colorado's banking industry has recently undergone significant change and, therefore, provides a good case study with which to gauge the impact of consolidation on sources of loans and access to credit for small business. We find that between 1994 and 1996, lending to small businesses in Colorado by small to medium size banking organizations grew much faster than lending by large organizations. This lending pattern was similar across in-state and out-of-state banking organizations. Thus, the difference is largely driven by size rather than by the location of the organization's headquarters. Some large banking organizations lost market share, but others were aggressive lenders to small business. As a whole, large banking organizations still provided close to 40 percent of small business loans made by banks in 1996. ; Small business borrowers faced a shift in the source of bank finance, but there was a large overall increase in loans, and so it appears that their financing needs were adequately met. The large increase in small business lending by small and medium banking organizations is a particularly striking example of responding to the opportunities created by consolidation. In the future, however, large banks may reclaim market share as they expand new and lower cost methods of small business lending.